Advanced Micro Devices (NASDAQ: AMD) - American manufacturer of integrated circuit electronics, which develops computer processors and related technologies. The company produces its products under the following brands: AMD, EPYC, FirePro, FreeSync, Geode, Infinity Fabric, Opteron, Radeon, Ryzen, Threadripper and others.
In early February, AMD submitted a report for the fourth quarter of 2021, which pleasantly surprised investors: The company's quotes rose by 5%.
Key points:
- revenue increased by 49%, up to $4.826 billion, — vs market consensus of $4.52 billion;
- Adjusted EBITDA nearly doubled from $0.753 billion to $1.446 billion on record sales;
- adjusted net earnings per share added 77% with 0,52 to 0,92 $ when forecasting in 0,76 $ thanks to the strong results of the second segment — corporate, embedded and custom solutions (Enterprise, embedded and semi-custom);
- free cash flow in the fourth quarter increased by 53% up to $0.736 billion.
Results are growing
AMD's core business is the development and production of central, graphics and hybrid processors, chipsets and systems on a chip, referred to as SoC. The American company divides its business into two parts, based on customer principle:
- Computers and graphics - this segment creates for personal computers, laptops and workstations the above computing systems.
- Corporate, embedded and custom systems - the current direction designs the above microcircuit electronics for server, embedded computing devices and custom-made equipment. The latter includes jointly developed solutions with customers: for example, this principle was used to create the latest consoles from Microsoft and Sony - Xbox and PlayStation.
2021 2009 was an outstanding year with record growth driven by strong customer demand in key markets: USA, China and Japan. Revenue in 2021 compared to 2020 increased by 68% from 9.763 to 16.434 billion dollars.
As for the fourth quarter figures, the Computers & Graphics segment increased by 32% to $2.584 billion over the period on the back of strong sales of Ryzen and Radeon processors. Division "Corporate, built-in and custom systems” has grown even stronger — by 75% to $2.242 billion due to strong demand for EPYC processors and custom solutions.
AMD Sales Structure, billion dollars
| 4к2020 | 3к2021 | 4к2021 | |
|---|---|---|---|
| Computing and Graphics | 1,960 | 2,398 | 2,584 |
| Corporate, embedded and custom solutions | 1,284 | 1,915 | 2,242 |
| total revenues | 3,244 | 4,313 | 4,826 |
AMD sales geography, billion dollars
| 2019 | 2020 | 2021 | |
|---|---|---|---|
| USA | 1,764 | 2,294 | 4,656 |
| China, including Hong Kong | 1,736 | 2,329 | 4,096 |
| Japan | 0,840 | 1,033 | 2,381 |
| Europe | 0,762 | 1,108 | 1,249 |
| Taiwan | 0,719 | 1,187 | 2,091 |
| Singapore | 0,597 | 1,096 | 1,389 |
| Other countries | 0,313 | 0,716 | 0,572 |
| Overall result | 6,731 | 9,763 | 16,434 |
Profit
AMD Q4 2021 Net Profit Decreases by 45% from 1.781 to 0.974 billion dollars compared to the same period last year. The main reason is, that in the fourth quarter of 2020 the company received a tax credit of $1.3 billion. Excluding this, adjusted net income increased by 76% from $0.636 to $1.122 billion.
Free cash flow increased in the fourth quarter, compared to last year's results, from 0.480 to 0.736 billion dollars and decreased, when compared with the data of the third quarter of 2021, from 0.764 to 0.736 billion dollars - largely due to strategic investments in long-term supply chains, which in the future, as planned by management, must maintain accelerated growth rates.
Key financial results of the company, billion dollars
| 4к2020 | 3к2021 | 4к2021 | |
|---|---|---|---|
| Revenue | 3,244 | 4,313 | 4,826 |
| Adjusted EBITDA | 0,753 | 1,152 | 1,446 |
| Profitability by speed. EBITDA | 23% | 27% | 30% |
| Net profit | 1,781 | 0,923 | 0,974 |
| Adjusted net income | 0,636 | 0,893 | 1,122 |
| FCF | 0,480 | 0,764 | 0,736 |
| net debt | Otric. | Otric. | Otric. |
Main idea
The main idea is the rapid growth of AMD's financial results - the company has shown phenomenal growth rates over the past five years., which annually increase by an average of 30-35%, mainly due to the results of the segment "Corporate, built-in and custom-made systems». For example, its revenue doubled in 2021 thanks to the growing adoption of AMD EPYC processors among cloud and enterprise customers.
Main question, which interests investors, Will the company be able to maintain this pace in the future?. AMD management considers, that at least in 2022 they will be able to maintain the current momentum - largely due to the expansion of their current portfolio and the launch of the next generation of PC products, games and data centers.
If in the fourth quarter of 2021 the main player in the company's sales was the Ryzen processor 5000, whose sales grew at a double-digit rate, everything can change in 2022.
At the beginning of 2022, management at CES announced the start of sales of new generation processors: Ryzen 6000 series with new Zen core 3+. At the same event, the first public demonstration of Ryzen processors took place. 7000, which should provide a significant performance boost over current Ryzen processors in the future. Ryzen 7000 scheduled to hit the market in the second half of 2022.
Additional fuel for growth in 2022 could be consolidation Xilinx results. At the end of January, AMD received permission to merge from the National Bureau of Antimonopoly Policy of the People's Republic of China., it remains to wait for a decision from the FTC - the US Federal Trade Commission. If there is no force majeure, then the AMD-Xilinx merger should close in the first quarter of 2022.
AMD Management Forecast
| 1к2022 | 2022 | |
|---|---|---|
| Revenue | 5 billion dollars | 21,5 billion dollars |
| Gross profitability | 50,5% | 51% |
| Operating expenses | 1,2 billion dollars | — |
| Operating expenses / Revenue | 24% | 24% |
| Interest expenses, taxes And so on | 0,207 billion dollars | — |
| Effective tax rate | 15% | 15% |
| tax rate in cash | 9% | 9% |
| Number of shares | 1,22 billion | 1,22 billion |
Comparison with competitors
AMD has shown explosive growth over the past five years, which allowed the company to significantly outperform its main competitors. The COVID-19 pandemic has driven even more growth as users around the world moved from offline to online, demand for AMD products has grown exponentially.
Comparison of AMD with market benchmarks
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|
| AMD | 100% | 91% | 157% | 407% | 810% | 1289% |
| S&P 500 | 100% | 122% | 115% | 154% | 179% | 231% |
| S&P 500 Semiconductors Index | 100% | 136% | 127% | 188% | 264% | 403% |
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| AMD | 36,01 | 46,88 | −0,55 |
| Intel | 7,32 | 9,84 | 1,06 |
| Nvidia | 63,47 | 74,08 | 0,99 |
| Broadcom | 18,63 | 37,85 | 1,89 |
| QUALCOMM | 16,58 | 20,25 | 0,72 |
What's the bottom line?
AMD releases strong Q4 2021 financial results and announces excellent guidance for Q1 and all of 2022, which exceeded the wildest expectations of investors. The company plans to increase its revenue by 45% up to $5 billion against the consensus forecast of $4.33 billion, and for the whole of 2022 31% to 21.5 billion dollars with a forecast of 19.26 billion dollars.
Following the publication of such amazing results, analysts at nine investment houses raised their target prices for AMD.
Analyst Forecasts on AMD Target Prices
| Previous forecast | Current forecast | |
|---|---|---|
| Raymond James | 140 $ | 160 $ |
| Mizuho | 150 $ | 160 $ |
| Deutsche Bank | 120 $ | 140 $ |
| KeyBanc | 155 $ | 165 $ |
| Truist | 128 $ | 144 $ |
| Susquehanna | 175 $ | 180 $ |
| Cowen | 150 $ | 160 $ |
| Jefferies | 145 $ | 155 $ |
| Craig-Hallum | 150 $ | 160 $ |
